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Medicaid Restructuring and Children with Special Health Care Needs

Introduction

An estimated 11.2 million children, or 15% of all children in the U.S., have special health care needs, based on the most recent data available from 2009-2010.  Their needs result from a range of conditions, such as Down syndrome, cerebral palsy, and autism.  These children may require services such as nursing care to live safely at home, therapies to address developmental delays, and mental health counseling. This issue brief describes the role that Medicaid plays for children with special health care needs. It presents data comparing the health and functional needs, coverage adequacy and access to care, and affordability of coverage for Medicaid/CHIP children with special health care needs and those with private insurance.  The Appendix includes state-level data on the distribution of children with special health care needs by household income (Table 1), the share of children with special health care needs who are covered by Medicaid (Table 2), and the share of Medicaid children with special health care needs who receive SSI (Table 3).

Medicaid and CHIP cover nearly half (44%, or nearly five million) of children with special health care needs (Figure 1). Medicaid or CHIP is the sole source of coverage for over 1/3 (36%) of these children.  Another 8% have Medicaid or CHIP to supplement their private coverage.  Medicaid provides a wide range of medical and long-term care services, many of which are not covered at all or only available in limited amounts through private insurance, and makes coverage affordable for many children with special health care needs and their families.

Figure 1: Health insurance status of children with special health care needs, 2009-2010.

Limits and reductions in federal Medicaid financing, as currently being considered by Congress, are particularly relevant to children with special health care needs because these children use services more intensively, and often incur greater costs, than other children.  Both the American Health Care Act (AHCA) as passed by the U.S. House of Representatives  and the Better Care Reconciliation Act (BCRA) as proposed in the Senate fundamentally restructure Medicaid financing by changing the current guarantee of federal matching funds without a pre-set limit to a per capita cap or block grant.  While the BCRA would exempt Medicaid children who are eligible based on a disability from the per capita cap, most Medicaid children with special health care needs are eligible based on their family’s low income and not based on a disability.  The change in federal Medicaid financing (together with eliminating the enhanced federal matching funds for the Affordable Care Act’s Medicaid expansion) is estimated to reduce federal Medicaid funds to states by $772 billion from 2017 to 2026 under the BCRA, according to the Congressional Budget Office.  Given the magnitude of these funding cuts, states are likely to look to limiting provider payment rates, the number of people covered, and the scope of benefits available, which could impact Medicaid children with special health care needs.

Who are Children with Special Health Care Needs?

As defined by the U.S. Department of Health and Social Services (HHS), children with special health care needs “have or are at increased risk for chronic physical, developmental, behavioral or emotional conditions and also require health and related services of a type or amount beyond that required by children generally.”  Their needs arise from a range of conditions such as autism, Down syndrome, and other intellectual and developmental disabilities (I/DD); physical disabilities such as cerebral palsy, spina bifida, and muscular dystrophy; mental health needs such as depression and anxiety; and complications arising from premature birth. They may need nursing care to live safely at home with a tracheotomy or feeding tube; attendant care to develop community living skills; medical equipment and supplies; mental health counseling; and/or regular therapies to address developmental delays.  They may have difficulty with bodily functions, such as breathing, swallowing, or chronic pain; difficulty with activities such as self-care, mobility, learning, or communication; and/or emotional or behavioral difficulties.

Nearly three-quarters (73%) of children with special health care needs live in low or middle income families, below 400% of the federal poverty level (FPL) (Figure 2).  About one in five (22%) resides in a household with income below the poverty level (less than $20,420/year for a family of three in 2017).  Another 22% live in a household with income between 100-199% of poverty ($20,420-$40,636/year for a family of three in 2017).  About one in three (29%) are in a household with income between 200-399% of poverty ($40,840-$81,396/year for a family of three in 2017).  Table 1 contains state-level data on the distribution of children with special health care needs by household income. Nearly six in 10 children with special health care needs are white, and about equal shares are black (16%) and Hispanic/Latino (17%).  Just over 20% of children with special health care needs are age 5 or younger, with the remainder about evenly split between the 6-11 and 12-17 age groups.

Figure 2: Demographics of children with special health care needs, 2009-2010.

How Do Medicaid Children with Special Health Care Needs Differ from Those with Private Insurance?

Greater Health Needs and Functional Limitations

Medicaid/CHIP children with special health care needs have significantly greater health needs compared to those with private insurance alone, with children covered by both Medicaid/CHIP and private insurance having the greatest needs. Medicaid/CHIP children with special health care needs are nearly two and one-half times as likely (24%), and those with both Medicaid/CHIP and private insurance are three times as likely (30%), to have four or more chronic conditions, compared to those with private insurance (10%) (Figure 3).  Some of the chronic conditions reported by children with special health care needs include autism, intellectual disability, asthma, depression, anxiety, attention deficient hyperactivity disorder, cerebral palsy, cystic fibrosis, muscular dystrophy, brain injury, heart problems, and epilepsy.  As a result of their greater health needs, Medicaid/CHIP children are twice as likely (6%), and those with both Medicaid/CHIP and private insurance are nearly four times as likely (11%), to have eight to 14 health care service or equipment needs in a year, compared to those who are privately insured (3%) (Figure 3).  These include the need for preventive, specialist, or dental care; prescription medication; physical, occupational, or speech therapy; mental health counseling; mobility or communication aids; home health care; and durable medical equipment, among others.

Figure 3: Health status of children with special health care needs, by coverage status, 2009-2010.

Medicaid/CHIP children with special health care needs also are significantly more likely to have multiple functional limitations compared to those with private insurance. Specifically, Medicaid/CHIP children are more than one and one-half times as likely (58%), and those with both Medicaid/CHIP and private insurance are nearly twice as likely (63%), to have four or more functional difficulties compared to those with private insurance alone (33%) (Figure 3).  Medicaid/CHIP children, including those with and without private insurance, are more likely than children with private insurance alone to have difficulty with bodily functions, such as breathing, swallowing, or chronic physical pain; activities or participation, such as self-care, mobility, learning, or communicating; and emotional or behavioral factors, such as anxiety, depression, or making friends (Figure 4).

Figure 4: Functional difficulties of children with special health care needs, by coverage status, 2009-2010.

Medicaid and CHIP cover many of the children with the greatest needs, including 60% of the 2.9 million children with special health care needs whose health conditions consistently and often greatly affect their daily activities (Figure 5).  Medicaid/CHIP is the sole source of coverage for nearly half (47%) of these children (Figure 5).  Medicaid/CHIP children are twice as likely (36%), and those with Medicaid/CHIP and private insurance are nearly two and one-half times as likely (43%), to have health conditions that consistently and often greatly affect their daily activities, compared to those with private insurance alone (18%) (Figure 6).

Figure 5: Insurance status of children with special health care needs whose health conditions consistently and often greatly affect their daily activities, 2009-2010.

Figure 6: Children with special health care needs whose health conditions consistently and often greatly affect their daily activities, by coverage status, 2009-2010.

Comparable Coverage Adequacy and Access to Care

Despite their greater needs, Medicaid/CHIP children with special health care needs are significantly more likely than those with private insurance to report that their coverage is sufficient to meet their needs.  For example, Medicaid/CHIP children with special health care needs (69%) are significantly more likely than those with private insurance alone (64%) to report that their coverage is adequate (Figure 7).  Medicaid/CHIP children with special health care needs (64%) also are significantly more likely to report that their insurance always meets their needs, compared to those with private insurance alone (60%) (Figure 7).  Comparable shares of Medicaid/CHIP children, those with Medicaid/CHIP and private insurance, and those with private insurance alone report that their insurance allows them to see all needed providers (71% vs. 73% vs. 70%) (Figure 7).

Figure 7: Adequacy of insurance among children with special health care needs, by coverage status, 2009-2010.

Medicaid/CHIP children with special health care needs have access to health care services on par with those who are privately insured.  Medicaid/CHIP children with special health care needs (92%), those with Medicaid/CHIP and private insurance (92%), and those with private insurance alone (91%) are about equally as likely to have had a well-child check-up in the last 12 months (Figure 8). Other access to care rates are high among all three groups.  For example, 92% of both Medicaid/CHIP children and those with both Medicaid/CHIP and private insurance report having a usual source of care when sick, compared to 94% of those with private insurance alone (Figure 8).  The rates for access to a usual source of preventive care also are high among the three groups (97% for Medicaid/CHIP, 98% for Medicaid/CHIP and private insurance, 99% for private insurance alone) (Figure 8). Medicaid/CHIP children with special health care needs also experience significantly better access to care on these measures compared with those who are uninsured (Figure 8).

Figure 8: Access to care among children with special health care needs, by coverage status, 2009-2010.

Greater Affordability

Medicaid/CHIP children are significantly more likely to report that their coverage is affordable compared to those with private insurance.  Medicaid makes coverage affordable for children with special health care needs by limiting out-of-pocket costs.  Medicaid/CHIP children with special health care needs (51%), and those with Medicaid/CHIP and private insurance (45%), both are more likely to report that their out-of-pocket health care costs are reasonable compared to those with private insurance (31%) (Figure 9).  Medicaid/CHIP children are more than five times less likely (6%), and those with Medicaid/CHIP and private insurance are half as likely (16%), to incur out-of-pocket costs of $1,000 or more, compared to those with private insurance alone (32%) (Figure 9). Out-of-pocket costs under Medicaid generally are limited to nominal amounts, and most children are exempt from cost-sharing, which protects families from the financial burdens often associated with special health care needs.  Affordability is a particular concern for families of children with special health care needs because, as discussed above, nearly three-quarters have household incomes below 400% of poverty, and nearly half (44%) are below 200% of poverty (Figure 3).  For an example of how Medicaid helps make private coverage affordable for children with special health care needs, see Gabriel’s story in Box 1 below.

Figure 9: Affordability for children with special health care needs, by coverage status, 2009-2010.

Affordability is important because the demands of caring for children with special health care needs can impede their families’ ability to work, an outcome that is significantly more likely among Medicaid/CHIP children. Given Medicaid/CHIP children’s greater health care needs and functional limitations compared to those with private coverage (Figures 3-6), it is not surprising that Medicaid and CHIP cover 59% of the 2.7 million children with special health care needs whose families have had to reduce their work hours or stop working altogether due to their child’s health status (Figure 10). Medicaid/CHIP is the sole source of coverage for just under half (46%) of these children (Figure 10).  Medicaid/CHIP children with special health care needs are more than one and one-half times as likely (32%), and those with Medicaid/CHIP and private insurance are over twice as likely (39%), to live in families who had to cut back on outside employment due to their child’s health needs, compared to those with private insurance alone (17%) (Figure 11).

Figure 10: Insurance status of children with special health care needs whose health status caused family members to reduce work hours or stop working, 2009-2010.

Figure 11: Children with special health care needs whose health status caused family members to reduce work hours or stop working, by coverage status, 2009-2010.

How Do Children with Special Health Care Needs Qualify for Medicaid?

Some children with special health care needs qualify for Medicaid based solely on their family’s low income.  Under the Affordable Care Act, as of 2014, states must cover all children in families with incomes up to 138% of the federal poverty level (FPL, $28,180/year for a family of three in 2017) (Figure 12); although some of these children have special health care needs, their Medicaid eligibility is based entirely on their family’s low income, without regard to their health status.1  States can expand financial eligibility for children above 138% FPL, and all do:  as of January, 2017, the median financial eligibility level for Medicaid and CHIP children nationally is 255% FPL ($52,071/year for a family of three in 2017).

Figure 12: Medicaid eligibility pathways for children with special health care needs.

Box 1: Gabriel, age 4, Louisiana
Gabriel was born prematurely at 27 weeks and spent a little over his first year of life in the hospital. When he was ready for discharge, his parents were told that he would have to go to a nursing home because the services that he needed to be safely cared for at home were not offered by his private insurance through his father’s job as a tugboat pilot. Medicaid covers these services, and because Gabriel qualified based on the extent of his health care needs, he was able to come home.

Although Gabriel has significant developmental delays and chronic lung diseases, his mother, Jessica, says he is “thriving at home.”  Jessica attributes Gabriel’s progress to the Medicaid services he receives to care for his tracheotomy and gastrostomy tube and monitor his oxygen supply and ventilator.  Gabriel requires close attention because he can decompensate quickly, and Jessica credits his Medicaid home nursing services with helping him stay as healthy as possible – he has only been hospitalized for illness once since his discharge.  He plays outside with the support of his direct care workers, and Medicaid provided a generator that enabled him to remain at home during recent flooding and power outages instead of going to a shelter or hospital.

Jessica says the private insurance copayments for all of Gabriel’s care would be “outrageous” without Medicaid.  Medicaid helps with medical supplies, prescriptions, visits with seven specialists and a pediatrician, and eight outpatient occupational and speech therapy sessions per month.  Medicaid also supplements Gabriel’s special education services, which, for example, do not address feeding issues.

Jessica studied social work in college and says she was used to helping connect others with resources but never thought that she would be “on the other end of needing support” herself.  She believes that Medicaid helps Gabriel to “reach his maximum potential” and maintain his quality of life.

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Other children with special health care needs qualify for Medicaid through a disability-related pathway.  States must provide Medicaid to children who receive federal Supplemental Security Income (SSI) benefits; these children live in poor families and have disabilities that result in marked and severe limitations in their ability to function at home, at school, and in the community (Figure 12).

Nearly all states choose to expand Medicaid financial eligibility for children with special health care needs at higher incomes through optional disability-related pathways (Figures 12 and 13).  As of 2015, 50 states opt to cover children with significant disabilities living at home under the “Katie Beckett” pathway; this pathway disregards parental income and assets, just as they are for children with disabilities living in an institution, which makes it possible for children with disabilities to receive necessary care while remaining at home with their families.  The child’s own income, up to 219% FPL ($26,460/year for an individual in 2017), and assets (generally limited to $2,000) are counted.  Katie Beckett children also must meet SSI medical disability criteria and otherwise qualify for an institutional level of care according to functional eligibility criteria set by the state.  Some states cover Katie Beckett children as an optional state plan group, while other states use a Medicaid home and community-based services (HCBS) waiver; using a waiver allows states to cap enrollment, which is not permitted under state plan authority.

Figure 13: State adoption of optional Medicaid eligibility pathways for children with significant disabilities, 2015.

States also can allow children with special health care needs in middle income families to “buy in” to Medicaid.  As of 2015, five states elect the Family Opportunity Act (FOA) option, a Medicaid buy-in for children with significant disabilities in families with income up to 300% FPL ($61,260/year for a family of three in 2017) (Figures 12 and 13).  FOA children must meet SSI medical disability criteria, and states may charge them premiums up to 5% of gross countable family income.

As reflected by different state policy choices about optional eligibility expansions for children with special health care needs, the share of children with special health care needs covered by Medicaid/CHIP varies by state (Figure 14).  Twenty-six states (26) provide Medicaid/CHIP to between 35% and 49% of the children with special health care needs living in their state. Another 16 states provide Medicaid/CHIP to between one-half and two-thirds of all children with special health care needs. For most of these children, Medicaid/CHIP is their sole source of coverage, while a smaller share have both Medicaid/CHIP and private insurance (Figure 1 and Table 2).

Figure 14: Share of children with special health care needs covered by Medicaid/CHIP, 2009-2010.

Few children with special health care needs (18%) qualify for Medicaid because they receive SSI benefits (Figure 15 and Table 3).2  Most Medicaid children with special health care needs (82%) do not receive SSI and instead qualify for Medicaid on another basis, such as a disability-related pathway other than SSI (such as Katie Beckett or an HCBS waiver) or a poverty-related pathway based on their family’s low income, as described above; most of these children are eligible based on low family income, according to other analyses.3  Some Medicaid children with special health care needs could qualify in a disability-related pathway but are instead enrolled through a poverty-related pathway because it is administratively easier and faster to establish eligibility based on low family income than based on disability.  Other Medicaid children with special health care needs still use health services to a greater extent than other children as a result of their health conditions, even though their health needs do not rise to the stringent level of disability required to receive SSI or qualify for an institutional level of care.  Under the BCRA, only Medicaid children who are eligible through a disability-related pathway would be exempt from the per capita cap on federal program financing.  Medicaid children with special health care needs who are not enrolled through a disability-related pathway would be included in the per capita cap.

Figure 15: Medicaid/CHIP children with special health care needs by SSI status, 2009-2010.

What Services Does Medicaid Provide for Children with Special Health Care Needs?

Medicaid covers a wide range of medical and long-term care services for children with special health care needs.  Medicaid’s Early and Periodic Screening Diagnostic and Treatment (EPSDT) benefit includes regular medical, vision, hearing, and dental screenings as well as the services necessary to “correct or ameliorate” physical or mental health conditions.  These services must be provided for children, regardless of whether a state chooses to cover them for adults.  Medicaid’s benefit package for children covers traditional medical services like doctor visits, hospitalizations, x-rays, lab tests, and prescription drugs. It also includes behavioral health, dental, hearing, and vision care as well as physical, occupational, and speech therapy and medical equipment and supplies.  Some children may receive therapy through special education at school, and Medicaid supplements those services by covering additional therapies that are necessary for a child to function outside of school, at home and in the community.  For children with chronic needs, Medicaid covers long-term care services, such as private duty nursing, attendant care, and assistive technology, that help children with special health care needs remain at home with their families.  It also offers case management through which a social worker coordinates medical, social, and other services for children with multiple needs.

Medicaid fills in coverage gaps for privately insured children with special health care needs. Private insurance typically is designed to meet the needs of a generally healthy population rather than people with more intensive or chronic needs. As a result, private insurance usually does not cover long-term care services and may offer limited coverage of other services important to children with special health care needs. For example, privately insured children may experience unmet needs for dental care, mental health services, or physical, occupational, or speech therapy.  Some privately insured children with special health care needs access Medicaid for wrap-around coverage for the medically necessary services on which they and their families depend to keep them healthy and safe at home and in the community (Figure 1 and Table 2). For an example, see Sam’s story in Box 2 below.

Box 2: Sam, age 6, South Carolina
Sam was born with Fragile X syndrome, a genetic condition that causes intellectual disability.  He also has mild autism.  Sam’s mother, Robin, noticed that he was not reaching his developmental milestones around age one.  He has difficulty communicating and learning skills such as how to brush his teeth and dress himself. Sam’s private insurance does not cover all of the specialists and services, such as physical, occupational, and speech therapy, that he needs.  Medicaid fills these gaps and supplements his private insurance by covering those services.  Robin says that the services Sam receives through Medicaid are helping him to learn the skills he needs to “be part of society and with his peers.”  8969-sam

How Much Does Medicaid Spend on Children with Special Health Care Needs?

Medicaid children who use long-term care services are likely to have special health care needs.  Medicaid spending data do not separately distinguish children with special health care needs but do identify children who use long-term care services. Medicaid long-term care services include institutional care, such as nursing facilities, intermediate care facilities for people with I/DD, and intermediate care facilities for children with mental health needs (ICF/IMDs), and community-based services, such as home health, personal care, and home and community-based waiver services.  As of 2013, nearly 400,000 child Medicaid beneficiaries used long-term care services (Figure 16).

Figure 16: Medicaid spending per child enrollee, FY 2013.

Annual per enrollee spending is over 12 times higher for Medicaid children who use long-term care services ($37,084) compared to those who do not ($2,863) as of 2013 (Figure 16).  This reflects the greater intensity and variety of needs among children who use long-term care services as compared to children who rely on Medicaid for only acute and preventive care services.

Looking Ahead

Capping and reducing federal Medicaid funding as provided in the AHCA and BCRA may pose a particular risk to children with special health care needs and their providers.  While the BCRA would exempt Medicaid children who are eligible based on a disability from the per capita cap, most Medicaid children with special health care needs are eligible based on their family’s low income and not based on a disability.

Children with special health care needs rely on Medicaid for its broad scope of medical and long-term care benefits that are typically not covered by private insurance.  These services keep children with intensive and chronic needs living at home with their families. In addition to filling gaps in private insurance and making coverage affordable, Medicaid is the sole source of coverage for many children with special health care needs in low and middle income families. Medicaid children with special health care needs have greater health needs and functional limitations, comparable coverage adequacy and access to care, and greater affordability compared to those with private insurance alone.

Children who use Medicaid long-term care services have higher annual per enrollee spending than other Medicaid children.  Consequently, policies that lead states to limit per enrollee spending or limit costly optional coverage groups could disproportionately affect these children by limiting their access to expensive but necessary services that are unavailable through private insurance.  While nearly all medically necessary Medicaid services for children are mandatory under the EPSDT benefit, states can provide – and may look to scale back – some optional home and community-base long-term care services offered through Section 1915 (c) waivers.  Additionally, many Medicaid eligibility pathways for children with disabilities are optional.  All states but one currently choose to expand coverage for these children, but optional eligibility pathways are potentially at risk as states adjust to reduced federal funding.  If optional eligibility pathways are not eliminated, budgetary pressures could lead states to scale back provider payments, and/or the limited services offered to children through optional waivers, with impacts on these children’s access to care and coverage that are less visible than a reduction in eligibility pathways.

Finally, Medicaid is an important source of revenue for children’s health care providers, particularly children’s hospitals.  Reductions to Medicaid payment rates, especially for children’s specialty services, or reductions in optional children’s coverage pathways could impact those providers’ revenue streams.  Because current proposals to restructure the Medicaid program could have significant consequences for enrollees and the health care system, the potential implications warrant careful consideration for their impact on children with special health care needs.

Executive Summary Appendix

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